ENI LOGS PROGRESS ON PRIVATIZATION, RESTRUCTURING

Italy's Parliament has approved the government's plan to privatize state petroleum company Ente Nazionale ldrocarburi SpA (ENI).

Parliament also recommended that ENI commit to a public stock offering of its most profitable units, Snam and Agip. Steps toward a major restructuring and privatization of the massive state holding company began in mid-1992 and accelerated by yearend.

ENI earlier this month said it expected, to post a profit for 1992 and not a loss of $830 million as reported incorrectly (OGJ, Jan. 4, p. 19). Just prior to the announcement by ENI Managing Director Franco Bernabe in London, Italian press reports quoted undisclosed government officials as projecting a slight loss for the company.

Meanwhile, ENI chemical unit Enichem unveiled further details of its restructuring. Enichem posted combined losses of more than $2 billion in 1991-92.

PRIVATIZATION STEPS

By Mar. 31, ENI must present its plan to privatize Snam and Agip as well as a list of other units to be offered on public stock exchanges.

Italy's government then will make a final decision while in the interim implementing plans for drawing up new financial instruments, such as pension funds, that will allow broad common stock ownership.

Treasury Ministry Pietro Barucci said privatization of Agip and Snam should be complete by yearend. However, Italian analysts contend stock sales still won't proceed then because the government isn't likely to have decided on legal devices to retain a controlling interest in the currently 100% state owned ENI subsidiaries.

Bernabe said privatization of ENI units Savio and Nuovo Pignone is under way, with Savio assets spun off into three companies, two of which will be sold.

As for Nuovo Pignone, Bernabe said, preliminary steps toward privatization have been taken, and "We have received many offers and requests of information by the main Italian and foreign engineering/construction groups."

Bernabe said Nuovo Pignone will enter a final stage of privatization this summer. Nuovo Pignone said it has been profitable every year since 1975 and is not currently unprofitable, as incorrectly reported. Nuovo Pignone also projects a profit for 1992 after posting profits of $32 million in 1991, $24 million in 1990, and $30 million in 1989.

Meanwhile, Barucci early this year visited Qatar, United Arab Emirates, Kuwait, and Saudi Arabia to present the Italian privatization campaign, citing Agip and Snam as those nations' best investment opportunities in Italy. In addition to the London and Middle East visits, similar trips are planned to Brussels and Tokyo.

International bankers Lazard Freres and Swiss Bank estimate the sale of 10% of Agip stock would fetch $1.3 billion. They, along with Goldman Sachs and Paribas, are assisting Agip and Snam with the public offerings.

IMPROVED PROFITS

Bernabe expects ENI profits to be restored to pre-1990 levels this year after weathering one of the company's most difficult years in 1992.

He cited massive debt and big losses for the group's chemical subsidiary as the cause of ENI's current woes. ENI's net debt to net equity currently stands at 110% and is expected to worsen to 130% by 1995.

Enichem must be drastically restructured, Bernabe said, enabling the unit to return to positive cash flow in 1993, with further growth expected the following 2 years. ENI projects total group cash flow will reach 12 trillion lire by yearend 1995.

Bernabe also pointed out that the public offerings of Agip and Snam stock don't preclude a similar, separate offering of ENI stock. That prospect is the subject of preliminary studies to be complete by the end of March.

ENICHEM RESTRUCTURING

Enichem will directly manage some of the companies it had previously maintained as part of a holding company in a newly restructured group.

Enichem will withdraw from operations in agricultural products, elastomers, detergents, and fibers.

Companies to be incorporated into the restructured group include Enichem Anic (basic/intermediate petrochemicals), ECP EniChem Polimeri (plastics), Serchem (industrial services), Istituto Guido Donegani (research), Enichem International (trading), Donegani Anticorrosione (anticorrosion products), and Enichem Partecipazoni (financial services).

The new group is expected to have revenues of $4.3 billion/year and 16,000 employees. The restructuring is expected to allow substantial cuts in management costs that are pegged at $130 million/year and boost efficiencies in the remaining companies.

Enichem also noted the recent startup of Enichem Elastomeri's styrene rubber plant at Baytown, Tex. The $65 million plant will produce 37,500 metric tons/year of thermoplastic styrenic rubber, boosting the company's worldwide capacity to 110,000 tons/year.